“We expect the factors that have inhibited lodging performance during
the first half of 2013 will dissipate as the year goes on,” said R. Mark
Woodworth, president of PKF-HR. “By 2014, any uncertainty caused by
fears of fiscal cliffs and sequestration should be alleviated, thus
resulting in improved attitudes among hotel guests, owners and
operators.”

One lingering concern among hoteliers may be the recent rise in interest
rates. “Moody’s Analytics, our source for the economic forecasts that
drive our econometric models, has been projecting a 150 basis point
increase in interest rates by year end 2014. Accordingly, our positive
lodging forecasts do incorporate any detrimental influence this may have
on investments and inflation,” Woodworth noted.

Occupancy Outlook

For 2014, PKF-HR is forecasting a very strong 3.3 percent growth in lodging
demand, along with a projected increase in supply
of just 1.0 percent. The net result is a national occupancy
level of 63.8 percent in 2014, the highest annual occupancy rate since
1997.

High occupancy levels are most prevalent in upper-tier hotels where
PKF-HR is forecasting rates to remain above 70 percent through 2017.
“Since most conventions and meetings are held in the larger, luxury and
upper-upscale properties, this will present a challenge for planners,”
Woodworth added. “Events will have to be booked further in advance, and
planners are starting to concede the need to pay higher room rates.”

Rates and Profits

“Throughout the recovery, we have been pleasantly surprised by the surge
in demand. That being said, the growth in average
daily rates (ADR) has been underwhelming,” said Woodworth. “Starting
in 2014, we foresee economic and market conditions that should allow
managers to become more aggressive with their pricing policies.” From
2014 through 2016, PKF-HR is forecasting annual ADR growth rates ranging
from 5.4 to 6.4 percent.

As a result of the strong projections of ADR growth, PKF-HR also is
forecasting some attractive gains on the bottom-line, as well. “With ADR
driving RevPAR in the years to come, we forecast double-digit,
unit-level NOI increases through 2015, a trend that started in 2011. We
have not seen such a sustained period of profit improvement since the
inflationary days of the 1970s,” Woodworth stated.

Budgeting is Local

Prior analysis conducted by PKF-HR found that 80 percent of a property’s
performance is influenced by local market conditions. Accordingly,
PKF-HR advises its clients to attain a thorough understanding of the
factors that influence the business environments in which their
properties operate.

“Each June, as owners and operators begin to prepare their budgets for
the upcoming year, we see a concurrent interest in our local market
forecasts, and that’s very encouraging,” said John B. (Jack) Corgel,
PhD., the Robert C. Baker professor of real estate at the Cornell
University School of Hotel Administration and senior advisor to PKF-HR.
“Among the 50 markets covered by our June 2013 Hotel
Horizons® reports, we see 2014 RevPAR forecasts
ranging from a low of 2.6 percent (New Orleans) to a high of 10.2
percent (Oakland). This just proves the localized nature of the lodging
business.”

The following statements highlight PKF-HR’s 2014 outlook for the 50
markets in the Hotel Horizons® universe:

Supply growth is estimated to be 1.0 percent or less in 27 markets.

33 markets are forecast to achieve occupancy levels at or above their
pre-recession peak levels.

Two markets are projected to suffer a decline in demand, but five
markets are forecast to experience a decline in occupancy.

39 markets are forecast to achieve ADR levels at or above their
nominal pre-recession peak.

“Overall, we remain bullish on the nation’s major lodging markets in
2014. All 50 of the cities we track are expected to enjoy an increase in
revenue during the year, but the diversity of the composition of supply,
demand, and pricing changes that will fuel the revenue growth is
something worthy of further investigation by industry participants as
they prepare their marketing plans and budgets for the upcoming year,”
Woodworth concluded.

To purchase a June 2013 Hotel Horizons® report, please visit www.hotelhorizons.com.Reports are available for each of 50 major metropolitan areas in the
U.S., and contain five year projections of supply, demand, occupancy,
ADR, and RevPAR.A video summarizing our June 2013 forecasts will
soon be available at www.pkfc.com.To view this press release on a webpage, please visit:http://goo.gl/Cju53.